Section 74 - Insertion of new section 194E - Direct Tax Laws (Amendment) Act, 1987

74. Insertion of new section 194E. After section 194D of the Income-tax Act, the following section shall be inserted with effect from the 1st day of April, 1988, namely: - 194E. Interest, salary, bonus, commission or remuneration to partners. (1) Any person assessable as a firm who is responsible for paying to a partner any income by way of,- (a) interest on capital or any other sum borrowed by it from the partner; (b) salary, bonus, commission or remuneration, by whatever name called, shall at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax on the estimated amount of the interest or, as the case may be, salary, bonus, commission or remuneration aforesaid due to the partner during the financial year at the average rate of income-tax computed on the basis of the rates in force for that financial year in which such income is credited or paid to the partner. (2) Where, during the financial year, an assessee derives such income simultaneously from more than one firm or where he was successively a partner in more than one firm, he may furnish to the firm responsible for making the payment referred to in sub-section (1) (being one of the said firms as the assessee may, having regard to the circumstances of his case, choose), such details of the payments referred to in sub-section (1) due or received by him from the other firm or firms, the tax deducted at source therefrom and such other particulars, in such form and verified in such manner as may be prescribed, and thereupon the firm responsible for making the payment referred to above shall take into account the details so furnished for the purposes of making the deduction under sub-section (1). (3) Where an assessee who receives the payments referred to in sub-section (1) has, in addition, any income other than the income referred to in sub-section (1) (not being a loss under any head of income) for the same financial year, he may send to the firm responsible for making the payment referred to in sub-section (1) the particulars of such other income and of any tax deducted thereon under any other provision of this Chapter, in such form and verified in such manner as may be prescribed and thereupon the firm responsible as aforesaid shall take such other income and the tax, if any, deducted thereon also into account for the purposes of making the deduction under sub-section (1) : Provided that this sub-section shall not in any case have the effect of reducing the tax deductible from the payments referred to in sub-section (1) below the amount that would be so deductible if the other income and the tax deducted thereon had not been taken into account. (4) The firm responsible for making the payment referred to in sub-section (1) may, at the time of making any deduction, increase or reduce the amount to be deducted under this section for the purpose of adjusting any excess or deficiency arising out of any previous deduction or failure to deduct during the financial year. .